IRS Doesn't Know Who Owes Obamacare Medical Device Tax, Collects Less Than Expected


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From the department of Who Could Have Predicted That? comes news that the Internal Revenue Service is blowing the collection of the medical device tax, one of the revenue streams expected to fund Obamacare. "the IRS cannot identify the population of medical device manufacturers registered with the Food and Drug Administration that are required to file a Form 720 and pay the excise tax," the Treasury Inspector General for Tax Administration (TIGTA) tells us in a July report publicly released this week.

Collections have been a tad less than expected too, which isn't so surprising given that the tax collectors don't really know who is supposed to pay it. The IRS "reported excise taxes of $913.4 million for the quarters ending March 31 and June 30, 2013," the TIGTA report tells us. But $1.2 billion was expected—on far more returns than were filed.

The 2.3 percent tax on the sales price (not profits) of medical devices kicked in on January 1, 2013 and is supposed to generate $20 billion through 2019 as part of the effort to keep the administration's signature Affordable Care Act economically viable. AdvaMed, the medical device trade group, protested from the beginning that the tax is a bureaucratic headache that would drive jobs and innovation overseas. At Forbes, John R. Graham suggests that American medical device makers are already losing sales to foreign competitors, at least partly as a result of the tax. Boston's WBUR reported last year that the medical device industry shed thousands of jobs, at least partially in anticipation of the tax (the medical device industry is huge in Massachusetts, though maybe not so huge as it was).

Remember that the tax is on gross receipts, not profits, so it digs deep.

And now we find that the tax isn't bringing in the anticipated cash flow, and its enforcement is a mess. That's a shocker.